Asian stocks opened higher today while regional bonds fell, as concerns about Deutsche Bank’s finances eased overnight after the lender was reported to be lining up a less-costly settlement with US regulators than investors feared. On a separate note, Brexit fears re-emerged after PM May said she plans to invoke Article 50 by Mar 2017.
- Core PCE in August rose 0.2% month-on-month and 1.7% year-on-year, both matching estimates and registering 0.1% improvements from its July-gains.
- Personal spending over the same period failed to register any growth, falling short of the 0.1% rise expected and slowing from July’s 0.4% rise. Personal income matched expectations of 0.2%, but was less than July’s 0.4% increase.
- A sentiment indicator from the University of Michigan rose to 91.2 form 89.8, beating the 90.0 expected.
- Deutsche Bank is said to be near a US settlement to pay just $5.4 billion, instead of the initially $14 billion sought after, AFP News reported Friday. The bank’s shares surged 6% and spurred risk-on sentiment in global markets.
- The S&P 500 Index rose 0.8% on Friday, posting a fourth consecutive quarterly gain of 3.3%; financial and energy shares led gainers.
- The US dollar weakened slightly, with the Bloomberg Dollar Spot Index declining 0.1%.
- Treasuries fell, as the benchmark 10yr yield rose 4bp to 1.60% with investors seeking riskier assets following news of Deutsche negotiating a better deal than expected with the US Department of Justice.
- Canada’s economy in July expanded 0.5% month-on-month and 1.3% year-on-year, exceeding estimates of 0.3% and 1.0% respectively. The faster-than-expected expansion was driven by the rebuilt production of Alberta oil companies that had been shut down by wildfires.
- Following the better GDP numbers, swaps trading showed the odds of a rate cut in the next year fell to 39% from 44% on Thursday, according to Bloomberg.
- 2Q GDP expanded by 0.7% quarter-on-quarter and 2.1% year-on-year, with the former beating the consensus estimate of 0.6% and the latter missing the median forecast of 2.2%.
- Prime Minister Theresa May said that she will invoke Article 50 by end-March 2017 to begin Brexit talks.
- Japan’s 3Q Tankan business survey for large manufacturing firms held steady at 6, unchanged from 2Q but less than the expected reading of 7. The outlook for the 4Q was 6, below the consensus forecast of 8.
- The index for non-manufacturing firms came in at 18, down slightly from 19 in 2Q and in line with economists’ forecasts. Outlook for 4Q was 16, below expectations of 18.
- Small firms surprised positively, with the index for current conditions coming in at -3 instead of the -5 predicted for manufacturing firms, and -5 instead of the -6 projected for non-manufacturing firms.
- The Nikkei manufacturing PMI improved in September to 50.4, from 50.3 in August.
- The yuan has officially become a global reserve currency, after entering the IMF’s SDR on Saturday, a milestone that is expected to breathe life into China’s bond markets by prompting estimated inflows of as much as $1 trillion over the next 5 years.
- September factory PMI came in at 50.4, matching prior month’s reading but a touch lower than the 50.5 expected. Non-manufacturing PMI rose to 53.7 from 53.5 in August.
- An index tracking private residential showed prices in 3Q fell 1.5% from the previous quarter, the biggest decline since Jun 2009 and the twelfth straight consecutive quarter of declines.
- Spot gold slipped 0.3% on Friday to end the quarter at $1,315.87/Oz; the precious metal is posted a quarterly loss of 0.04%, its first quarterly loss this year.
- Silver for immediate delivery remained supported at the $19/Oz handle, and closed 0.8% higher on Friday at $19.1740/Oz.
- Crude oil for November delivery rose 0.9% to $48.24/bbl Friday, before paring some of its gains today following news that rig counts rose for a fifth consecutive week, up 7 to 425.
- Iran has also declared its intention to increase exports to 2.35 million barrels per day in the coming months, while Russia’s production last month reached a post-Soviet record.
- Spot 1.3648
- The Singapore dollar weakened after UK PM Theresa May said she would pull the trigger on Brexit by Mar 2017, prompting gains in the greenback against other major currencies.
- Ina note to clients, BoAML wrote that any weakness in GBP should impact SGD the most among Asian currencies.
- USDSGD rose 0.1% to 1.3649 earlier today; the 1.3700 resistance is the next level to be tested.
- Spot 0.7693
- AUDUSD rebounded sharply after testing the 0.7600 handle last Friday and continues to trade around the 0.7650 pivot.
- The currency pair is being buoyed by renewed bets that newly-appointed RBA Governor Philip Lowe will refrain from cutting rates in the near future as the economy continues to be underpinned by rebounding commodity prices and a diminished drag from falling mining investment.
- Spot 1.3111
- USDCAD pared prior gains to the 1.3200 handle to settle at 1.3127 on Friday
- The currency pair was 0.2% lower today at 1.3107 as continued oil strength as well as better-than-expected GDP numbers last Friday drove the pair lower.
- Spot 6.6763
- USDCNH was little changed today, following Friday’s 0.1% gain. China markets are shut for a week-long national holiday.
- Spot 101.49
- USDJPY rose by as much as 0.3% earlier today, to an intraday high of 101.66
- The downward trend for USDJPY remains intact, and a break above the 103 level could potentially signal a reversal.
- Spot 1.2945
- GBPUSD slipped as much as 0.5% to a day-low of 1.2902, following news over the weekend that PM Theresa May plans to invoke Article 50 by end-March 2017.
- The currency pair has since pared some of its opening losses but momentum remains firmly to the downside.